It's all right to tell your kids you are broke

Should they shield their children from the hard times and spend like there's no tomorrow? Or is it better to share the reality that more families - often their own - simply can't have it all, even at Christmas? It can be a real dilemma.

"I've explained the situation, and I've also avoided it," says Mimi Chacin, a mom and business owner in Miami whose husband lost his advertising job. The family is doing OK. And in fact, the children's cooking classes Chacin teaches have remained full so far - a sign, she says, that many parents still are willing to spend on some extras for their kids.

But in their own household, she and her husband still are having to cut back - on travel during the holidays, for instance.

"I find myself not wanting to put them under that stress, but also sitting down and explaining that things aren't easy for anybody right now," Chacin says of her sons, ages 9 and 4.

Rita Cortese, who owns a Plato's Closet store, part of a chain of teen-oriented secondhand clothing shops, has been hearing more of these conversations among parents and their children in recent months, especially over bigger-ticket purchases. While most items in the store are in the $5 to $7 range, a pair of designer jeans could be $25, for instance.

"The parents will say, 'You can't have the jeans and the sweater. Pick one,"' says Cortese, whose store is in Deptford, N.J., just outside Philadelphia.

Now in her second year of business, Cortese chose the store because she thought it'd be fairly recession-proof - and, so far, it's doing relatively well. This year, she says customers are more likely to spend a total of $75, rather than the $150 to $200 they were spending last year. But she's also had many more customers who come in search of "gently used" clothing to save money. And more teens are bringing in clothing to trade for a discount.

Emily Collings, an 18-year-old college freshman from Washington Township, N.J., who works at the store, says she's noticed friends spending less money on themselves and others, and even making gifts for the holidays.

She lives at home and also has had more frank conversations about money with her parents.

"We always talk about it," Collings says. "And they've told me that it's not going to be so easy for me to say, 'Mom, I'm going out tonight. Can I have $20?' "

Retailers that focus on teens and children, among them Abercrombie & Fitch Co., American Eagle Outfitters Inc. and The Children's Place, all reported a drop in sales in November compared with the same month last year. Department stores also reported lower sales for the month, though retailer Bon-Ton Stores Inc. said children's wear was among its strongest performers.

Indeed, some businesses that provide goods and services for children report that they're doing relatively well - and some have even seen an increase in profits.

Lisa Jacobson, the chief executive of Inspirica, a tutoring company that caters to wealthier families, says she was surprised when she found that September was her best month financially in 25 years of business.

"It seemed very odd to me," she says. But when she spoke to parents, she found that, in this economy, many of them were more focused than ever on their children doing well in school.

"I really do think that, overall, it's the last thing people drop," she says of the money parents spend on their children.

At BabyEarth, a Texas-based baby products retailer that focuses on higher-end, eco-friendly products, officials say they've seen a slowdown in sales growth in recent months, but that sales are still increasing.

"Even in this economy, parents are still shelling out $900 on Orbit Strollers, $12 for spiffy BPA-free glass bottles, $395 on organic crib bedding and even $300 for organic crib mattresses," says Cathy Hale, a spokeswoman for the company.

It does depend on the age of the child, certainly, says Michal Ann Strahilevitz, a professor of marketing and consumer behavior at Golden Gate University in San Francisco.

But especially as children get older, she thinks it's important for parents to talk openly about what their families can and can't afford - and to make it a life lesson, of sorts.

"Money is not the best way to show love to children," Strahilevitz says. "So if you need to cut back on spending, think about other non-monetary ways to make the holidays special for you and your family."

Darren Wallis, a dad in Webster Groves, Mo., suburban St. Louis, says he and his wife have tried to do that with their sons, ages 10, 8 and 4, even though the family is financially stable right now.

In recent weeks, his older boys have been going through advertising circulars and making their holiday wish lists. "They do go with that everything-and-the-kitchen-sink approach," says Wallis, who works in agribusiness.

But when Wallis asked his boys to include prices and total them up, even his older son was a bit shocked that his wish list came to $904.

Wallis and his wife decided to use it as an opportunity to talk about what that money could buy - "Here's how many tanks of gas that would be. Here's how many trips to the grocery store."

"We wanted them to have some real-world practicality," Wallis says. (And no, he won't be buying everything on the list.)

They've also tried to get their boys to focus on people who have less than they do. And it appears to be working, he says, evidenced during a recent food drive for their Boy Scout troop.

Without prompting, they told their parents: "Let's give more this year."